Indianapolis Times, Volume 41, Number 79, Indianapolis, Marion County, 12 August 1929 — Page 11

ATC. 12, 1929.

Flood of Liquor Pours From Huge Leaks in Prohibition Dam

Thousands of Gallons of Industrial Alcohol Diverted Through ‘Covered Houses’ to Supply Nation’s Thirsty Patrons.

Walker Will* brand!, termer ansistant Inited State* attorney general in rbarge of prohibition, begins in this, the seventh article of her serie*, the revelation of the “big leak*’’ and point* out how thousands of gallons of industrial leobol are being diverted through “cover houses” for illegal uae and how the abused permit” system, bostered up bv tremendous political pressure, forest the Federal Government into the role of helpless collaborator In one of bootlagging's most successful enterprises.) BY MABEL WALKER WILLEBRANDT 'Copyright. 1929. by Current News Features. All rights for publication reserved throughout the world.) Where does all the liquor come from? What constitute the “big leaks” in prohibition? Typical questions most frequently propounded to me. The ' leaks” are many and varied. Some I shall mention and describe, not to indicate, in any sense, a final failure of prohibition, for in my candid opinion it has not failed of its essential purpose—the limitation and restriction of liquor consumption—but rather to serve as a basis of a better understanding, by the reader, of suggestions I shall advance farther along in this discussion for improvement in prohibition enforcement methods. Lack of information, or too much from unreliable and biased sources, has clouded the perspective to such extent that the formation of sound conclusions with respect to a remedy is made difficult indeed. To illustrate: Hardly a day passes, right here in the nation's capital, that cither police or prohibition agents do not make a sizable seizure of ‘ moonshine” liquor flowing in from stills in nearby Maryland or Virginia. At the time this is being written, newspapers carry stories of a seizure of more than three thousand quarts of “Maryland corn,” temporarily parked in a garage.

Most people, unfamiliar with the liquor history of the national capital, naturally would view seizures such as the above, reported almost in the local news sheets, as the direct outgrowth of the prohibition law. Moonshine Is Eclipsed Such is not the case, however. Ready market for tax-free liquor always has existed in the metropolitan centers of Baltimore and Washington Stills were active and nemerous operation long before prohibition. Corn liquor always has been a more or less popular beverage with certain indiscriminating drinkers. Many old-time saloonkeepers of Baltimore and Washington included the tax-free product among their merchandise, and reaped the enormous profits acquiring from sale of the moonshine brew to a clientele whose pocketbook or tastes were satisfied with the cheaper article. There may be. and probably there is, more illicit distilling around Washington now than before prohibition. But the basic condition always existed. The only difference being that in the old days it attracted ’ little attention Methods of obtaining alcohol with which to supply a thirsty populace are as ingenious as they are numerous. Some time ago a drug concern located in a sparsely populated town in Texas secured the release on permits for medicinal use of 200 barrels of Jamaica ginger. Jamaica ginger is 90 per cent alcohol. Two hundred barrels of it would take care of quite a sizable quantity of old-fashioned k tummy-aches”—many more than would be likely to occur in a sparsely populated Texas community. The Biggest Leak of All The fact is obvious that such an immense quantity of the “ready” could not have any legitimate medicinal distribution by any one drug concern in any one small locality. In my honest judgment the greatest single source of liquor supply today is alcohol diverted illegally from concerns bearing the stamp of respectability in the form of a government permit. Long before national prohibition the government authorized certain industries such as paint factories, dye and chemical plants, manufacturers of perfume, etc., to withdraw tax-free alcohol for use in the preparation of such products. Under kthe existing law these industries still are permitted to withdraw alcohol with no rest! etion other than regulations promulgated by the treasury department. I contend, and have from my experience for years, that these regulations stop far short of the proper legal control necessary to keep industrial alcohol from being the chief source of the illicit cocktail supply , Let no one make the mistake of assuming that I would hamper, harass or even make unduly difficult the conduct of legitimate business which needs alcohol. But making the regulations which govern its use. crisp, definite and as restrictive as the law permits, would safeguard legitimate business. It would hamper only the illegitimate concerns which use their permit as a cloak to divert alcohol. “Cover House” Used These latter all divert through the well-known ruse of shipments via “cover houses.” A “cover house” is to the alcohol racketeer what a “fence” is to a thief. Let me illustrate. The dishonest permittee, under present regulations, is obliged only to show in his office a letter or some other form of confirmation of the sale of his products. Government inspectors take a list of the % places where the permittee’s files 'indicate that his products have gone. Low I will cite an actual incident. Inspectors found that permittee “A” shipped 50.000 gallons of highly alcoholic "Carnation Perfume” to “X.” The inspectors went to see “X.” They asked. "Did you receive 50.000 gallons of ‘carnation perfume’ from Permittee A?” “X” replied. “Yes.” The inspectors looked about, but “X’ apparently had only a rented room, a desk, and a telephone. They asked to see where the 50,000 gallons of “Carnation Perfume’ was. “X” replied, ’’But it’s none of your business where it is or what I have done with it.” And the tragic fact is. that so far as prohibition enforcement is concerned under the regulations as now written, it wasn't any of the business of the inspectors to follow the product to its ultimate disposition.

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Nor can the inspectors who plainly have run into a lie return and charge the original permittee “A” with dereliction of his duty or revoke his permit for sending 50,000 gallons of “Carnation Perfume” to this fake establishment. These fake establishments, with a set-up as ostensible consignees, are what are known as “cover houses.” Would Stir Storms In my legal opinion the regulations issued by the treasury department could be so drawn as to drive these “cover houses” practically out of business. To do it would, however, mean standing firm against a tremendous lot of pounding from the organized drive of thousands of permittees with heavy political influence. I know this, because repeatedly my office recommended legal change in the regulations. I remember specially the fate of our recommendations about two years ago. They were well received by Dr. Doran, commissioner, and highly capable chemist, and other treasury officials, and we all practically agreed upon the details. But our puny legal beginning of improvement in the regulations were exposed to the blighting political influence of the alcohol trade! Resolutions against the proposed changes, which I didn’t know any one but our two government departments had seen, began to pour in. Lobbyists came to my office, alleging that I was exerting a malignant influence over the treasury department! Drug associations, alcohol lobbyists, the patent medicine group, all appeared! Finally, the regulations came out without the proposed changes. The improvements had died a-borning! Privilege Is Valuable Every permittee, when he makes application under the law, asks the government for a privilege. It is a valuable privilege. He expects to make money out of it. To get that privilege, he enters into a contract with his government, in my judgment the government has a perfect right to require as a condition to his receiving this valuable privilege a considerable degree of diligence on his part as to where and to whom he will sell his products. There is no reason why before permittee “A” above-mentioned ships the 50,000 gallons of “Carnation Perfume” with high alcohol content to “X,” he should not by contract agree to let the government into the secret of “X’s” request for the consignment. In an attempt to prevent the diversion of alcohol, treasury regulations prescribe that it be treated by certain formulae of denaturants, which are supposed to make it undrinkable. For some uses the alcohol must be what is termed “specially denatured,” and for other uses “completely denatured.” Little trouble comes from misuse of the latter, which is either nauseous or poisonous. Much of the “specially denatured” alcohol, however. is susceptible to manipulation whereby the naturing products may be eliminated. General Andrews’ Regime Crooked permittees naturally prefer the “specially denatured” type. Great pressure is exerted on every administrator to O. K. more and more, ar.d weaker and weaker, formulae for “specially” denatured alcohol. Such a permit becomes an i open door by which the permittee | can enter a field of operations en- ; tirely outside the law. | The policy of handing out permit privileges always has been sub- | jected to so much political pressure j that it has been marked by vacil- | iation and puerility. It is true that ’ while Dr. Orville Matthews was j Commissioner Haynes’ assistant he I said definitely “no” to the multiplying applications. But by the clOoe ; of General Andrews’ regime permits j and permittees had reached into higher mathematics! Athing little apprehended, but which formed a serious source of weakness in enforcement, was that the amounts of alcohol that per- | mittees could handle monthly were enlarged greatly, and in many instances made unlimited. Alcohol manufacturing plants are given the right to make unlimited quantities of alcohol. i These plants are not bootlegging ; concerns by any means, but they are making all the alcohol th*i. ! they can sell, and the amount that

they can sell is increasing daily at an alrming rate, away beyond the reasonable growth of businesses and trades that need alcohol for legitimate purposes. Witness how some alcohol manufacturing stocks have sky-rocketed on the stock exchanges; note also the increased imports of sugar for alcohol factories. Market on Increase Investment bankers, in advertising an issue of securities of an industrial alcohol company, included in.their prospectus the following: Commercial alcohol plays a vital part as a solvent or base in industrial alchemy, and likewise in the manufacture of dyes, glass, ink, drugs, paint, perfumes, films, and hundreds of other essential products, the demand for which constantly is increasing. Such is the background of the steadily expanding market for the commercial alcohol industry, which in the United States has grown from an annual production of 1,000,000 gallons in 1906 to more than 90,000,000 gallons in 1928. Would it be unfair to the legitimar,e alcohol companies, eager to keep a legitimate business, to restrict the amount they can manufacture to some figure reasonably near the actual needs of the country? In my judgment, one of the most important steps to stop the largest source of liquor supply in the country today is for the commerce department or some other disinterested agency to find out how much alcohol readily is needed to meet actual industrial demands, and then limit the issuance of permit privileges to figures reasonably near such needs. To deliberately grant so '■ many privileges where liquor can flow in unlimited amounts just means increasing proportionately the number cf inspectors to watch how the privileges are used. But no such increases in the inspectors’ forces have been made. It would have been simpler to have withheld these grants. Tracing Is Hopeless To trace leaks has become wellnigh hopeless. The government’s policy has been like pouring BB shot on the floor with one hand and trying to pick it up with the other. I’m not inferring that all permittees are dishonest. Far from it. But the honest ones are put at a disadvantage by the weak-kneed policy of too easy grant of permits. They should not be subjected to the competition of “fly-by-night” concerns. There is every economic reason that old firms with established reputation will use government privileges most fairly. They should be given first chance. Allowing newly organized firms to have these valuable permit rights should be done very infrequently. Some lawyers in the treasury department have justified their “yes-yes” policy by saying that the prohibition law gives the commissioner no power to say “no” to applicants for permit privileges unless they are found to be actually convicted law breakers. I do not so construe the law. The only way any law can be made certain is to have the courts speak on it. I have urged, literally begged, prohibition officials yearly since 1922 to refuse applications and let the applicants sue. I have looked with eagerness to the chance thus to clarify the limits of discretionary powers of the treasury department in such matters. But the prohibtion office has said “no” so seldom that only one case raising the question has reached the supreme court of the United States in the whole ten years of enforcement. It was the case of the Ma-King Products Company, 271 U. S. 479, where the court observed, “Here plainly the refusal of the permit involved no error of law.” Easy to Obtain Liquor • What I’m emphasizing is that this too liberal grant of “special” permits has created a big source of liquor supply in the United States today. It is easy to obtain liquor now. The public believes that enforcement has broken down. The conditions might be quite different if a sturdy policy of restriction of special permits had been maintained steadily from the first. Permits no longer are issued in Washington, but the formulae for these specially denatured alcohol privileges are subjeect to approval at Washington. In the reorganization of the last year, and since civil service ratings have been required. some courageous administrators have been wrestling valiantly with the permit situation in their respective districts. Their task is no easy one, for although they may say “no” to the loose issuance of anew permit, most of them took charge of districts where far too many permits already were in existence. It Is a much harder job under the law to revoke a privilege once given, upon which the citizen may be able to show a large outlay, than it is | to prevent his obtaining government sanction to handle alcohol in the beginning. One Leak Plugged ! To illustrate: In Philadelphia there functions as prohibition administrator Colonel Samuel O. Wynne, one of the ablest men in the entire service. He inherited a whole flock of maladorous out-and-I out diverters of alcohol from former halcyon days for alcohol racketeers in the City of Brotherly Love when permits apparently were doled out with a prodigal hand. He is redusing the flow of alcohol in his district very materially. Frequently agents are called upon for a high degree of courage in curbing these powerful permittees On Dec. 12. 1925. two investigators, Leo Connor and Andrew Quigley, with whom I have come into close personal contact, with the result that I hold their efficiency and integrity in the highest esteem, “bumped off” the Burlington distillery at Burlington. N. J. These men were informed by the Burlington people. “You won't last thirty days.” On Jan. 2, 1926 at 11 a. m., these agents were handed a telegram

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dated Dec. 31, from Washington, which read: “Your services are discontinued at the close of business as of Dec. 31, 1925, without dereliction or misconduct. dSigned) Walton A. Green.” However, when the men stood pat and dignifiedly refused to enter into any bargains for reinstatement, W G. Murdock, as administrator acting for General Andrews, said, “For God’s sake don’t tell anybody, not even your families, about that telegram.” The men were reinstated Violation Was Plain This Burlington concern had been given a permit in 1920. The permit had been withdrawn by the government for several years, but about 1924 there was a reorganization of the company and a reissuance of permit privileges. The evidence of the diversion of about 95,000 gallons of alcohol through a cover house was very plain. When the revocation of the permit was in litigation, the government was “represented” by Roscoe Harper, another one of General Andrews’ appointments mentioned before. He failed to call as witnesses the two agents who had collected the evidence! Consequently the government lost the case, and the permit was reinstated. This is one of the permits which gave, by the loose administrative policy I just have described, the power to manufacture an unlimited quantity of alcohol and to put it out denatured by any one of the special formulae, many of which enable the alcohol to be used in beverages after a comparatively simple cleaning process. As an excellent example- of the value of a thorough investigation before granting permits, the Quaker Industrial Alcohol distillery is, a case in point. It had a broad basic permit granted in 1924. In 1927 it asked for the additional right to withdraw 100,000 gallons a month of its own “specially denatured” alcohol for the purpose of manufacturing, on its premises, ethyl acetate. The administrator before whom their request was pending refused to say “yes” loosely, without a careful investigation. No Legitmate Market The investigation disclosed that there was no legitimate market for the requested ethyl acetate, and the plant did not have the capacity to handle that much alcohol. The alleged increase was based upon faked orders. Asa result of a court hearing the permit to withdraw 100,000 gallons of alcohol a month not only was refused, but the Quaker industrial Alcohol Distillery had its permit privileges revoked on the ground of fraud. In October, 1928, In Baltimore, Colonel A. W. W. Woodcock, one of the ablest of United States attorneys, successfull prosecuted an alcohol case which is qute typical of the kinds of fraud in diversion which often are detected or stopped. This was an “inside deal.” An election official of Maryland bribed chemists in charge of the denaturing process and others who ran the pumps which carried the pure alcohol to tanks. He spent atlogether, in bribes, $6,000. They loaded a car with pure alcohol and billed it as “pyro” (pyro is a denatured alcohol used in automobile radiators). The election official being notified of the car’s initials and numbers, diverted it and sold the contentsTn the bootleg trade. He succeeded in getting about ten cars out that way in a year. A simple calculation shows hOw much money he made in these transactions, which were discovered. Made Barrel of Money One carload of pure alcohol would make 64,000 quarts of synthetic whisky. At $4 a quart the ten cars reached a bootleg value of $2,560,000. Even if obliged to. bribe a few city police and deduct the price of bottling and delivery, the conspirators made a small fortune on an initial outlay in the form of a bribe of only $6,000. Before I lived so close to repulsive facts of this kind. I found it possible to be much more unconcerned at the sight of really splendid people of high principles imbibing bootleg liquors. Repeatedly facing the trail of bribery and ugly, unfair profits in the hands of racketeers which every quart of whisky signals today, I can not put aside the conviction that the price is too high. (In her next installment Mrs. Willebrandt tells about the beer leak.) CLUBS PLAN FESTIVAL Civic Groups to Hold Accident Prevention Demonstration. United South Side civic clubs will hold a committee meeting tonight to plan for the Accident Prevention festival Sept. 7-8 at Garfield park. J. Edward Burk, chairman, said the committee will discuss means of co-operating with Frank Owen. Acj cident Prevention department head, ! tonight at a session at Garfield J shelter house. The accident pre- | vention demonstration will be staged j preliminary to opening of schools.

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INDIANS BROKE AND DISEASE IS ONJNCREASE Senate Committee Says Tribes Have Been Looted and Exploited. Bv ScriDDS-Hotcard Xcieson-'rr * i” WASHINGTON, Aug. 12—Indians on a score of reservations in five northwestern states were found in a pitiable condition by a subcommittee on Indian affairs, according to Senator Burton K. Wheeler of Montana, who has just returned from the investigating trip. Tuberculosis and trachoma are decimating them; their schools and hospitals are hardly worthy of the name; their funds have been “squandered” without accounting, and they have been compelled to pay for irirgation improvements which are failures, Wheeler said. He blamed the Indian bureau, under its past management, and “politicians of both parties,” for the situation. Tuberculosis Spreading “I should estimate 25 per cent of he Indians on reservations we visited have tuberculosis,” Wheeler said. “It runs as high as 50 per cent on at least one. Trachoma and venereal diseases also are increasing. Indians are not isolated for treatment, and with an average of one tuberculosis patient to a family, in the one-room huts in whch they live, the disease is spreading. “We found the schools on most reservations, as well as their few hospitals, generally unsanitary fire-traps. 'ln such schools they are receiving about a fourth-grade education; then are turned out, untrained as mechanics or farmers, on the reservation. Those who are trying to farm are struggling against conditions which break the hearts of white farmers trained to the profession. Tribal Funds Exhausted “The Indians are broke. Their tribal funds have been squandered as have their herds and lands. Lands are leased as low s 6Vi cents an acre, when 10 cents would not cover taxes. I regret to say that every irrigation project on an Indian reservation has been a financial failure, due in large part to incompetence and mismanagement. “In some instances the government has taken valuable water rights, has used the Indian’s land for ditches, and has used tribal funds to build the ditches. The Indians have never been paid for the water or land, but have been compelled to pay chares whgich amount to confiscation. “The Indian bureau, while handling millions of dollars in tribal funds for fifty years, has never made an accounting to the tribal councils, so far as we could find, nor has it ever accounted for the millions of dollars spent of money of the individual Indians. The Indians say they are told to ‘get out’ when they ask for such accounting.”

DIVORCE IS GRANTED Millionaire Who Kidnaped Children Wins Suit. Bv United Press • , PARIS, Aug. 12—Announcement that Frank Woodward, American millionaire who staged a sensational “kidnaping” of his children here last winter, has been granted a divorce in Sonora, Mexico, was today by Arturo Del Toro, Sonora and New York divorce lawyer. The announcement said Mrs. Woodward receives $1,000,000 and trust funds of $75,000 each are established for the two children. The girl Ruth will be in her father’s care and the boy Frank Jr. will live with his mother. Woodward, who lives in New York, kidnaped the children from their mother here and took them to New York. He seized them from the grounds of an exclusive school and worried away in an automobile to catch a fast ship. Swedes to Hold Milking Contest Bit United Press KARLSBAD, Sweden, Aug. 12Just to prove that Swedish youth has not been spoiled by the influence of the “jazz age” but can still take a turn at the chores around the farm, milking contest will be held here in connection with the art and industry exhibition this summer.

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MERGEBS DEFENDED Modification of Anti-Trust Laws Predicted. Bn United Press WILLIAMSTOWN. Mass., Aug. 12—Mergers, industrial combinations and trade associations were defended today before the institute of politics by Bethuel M. Webster Jr., former assistant United States attorney-general. Declaring that while he did not regard the anti-trust laws as a “thoroughly consistent, analytically perfect body of jurisprudence,” Webster said they “satisfy the need for restraint” and expressed doubt that a satisfactory substitute could be devised to meet the obvious need for some form of strict regulation of business. He predicted, however, that the anti-trust laws undoubtedly will be modified to meet changing conditions, and declared that “a bill permitting associated buying in foreign markets will no doubt be passed.” Deprive Fish of Privacy. Bit United Press FLEETWOOD, Eng., Aug. 12Even the fish at the bottom of the sea are being deprived of their privacy by modern inventions. An “echo sounder,” which aids fishermen in listening-in for fish and guiding their nets, has been invented and may revolutionize fishing.

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LAWLESSNESS OF OFFICIALS IS DISCUSSED Investigation of Illegal Tactics Looms by Federal Committee. Bv Scrivns-How'ird Xeicspantr AllidKee WASHINGTON. Aug. 12—Virtual admission that federal officers and judges have sometimes adopted illegal tactics today was read into the action of the national crime commission in naming a subcommittee to investigate "lawlessness by governmental enforcing officials.” It is understood that the plan to obtain information on prohibition killings, abuse of injunctions in labor strikes, tapping of telephone and telegraph wires, use of stool pigeons, unwarranted invasion of person and property and other illegalities has the complete approval of President Hoover. He has frequently stated in his papers and addresses that lawlessness on the part of officials tends to breed crime and civilian resistance. It is expected, however, that the subcommittee will go into the enforcement records of state and local as well as federal officials. It may, for instance, investigate many incidents in which such officers as the Pennsylvania coal and iron police have figured. The readiness of marshals to deputize corporation's employees in labor troubles is another problem that may be studied. The tendency of local authorities to oppress various groups of a community also may be looked into. Discrimination against foreign born, Negroes and the humbler groups that live in segregated colonies in large cities will be checked up. Various reports of violent handling of apparently innocent citizens attending civil liberties protest meetings have been reported within the last year.